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Salesforce Rides on Digital Transformation, Acquisitions

Zacks Equity Research
·3 min read

salesforce.com, inc. CRM is benefiting from a robust demand environment as customers are undergoing a major digital transformation. The rapid adoption of its cloud-based solutions is driving demand for its products. Salesforce’s focus on introducing more aligned products as per customer needs is driving its top line.

Management believes that digitization is reinforcing the company’s strategic relationships. Its ability to provide an integrated solution for customers’ business problems is the key driver. The firm’s products like Trailhead and myTrailhead are helping companies through their transformation processes as well as increasing business scale with modern technology.

Saleforce believes digital transformation will consistently open up a huge growth opportunity for the entire industry. As enterprises progress with digital transformation efforts, the use of cloud services is expected to significantly shoot up in the upcoming period.

According to IDC estimates, spending on public cloud services will grow from $229 billion in 2019 to nearly $500 billion by 2023, at a CAGR of 23%. Per a ResearchAndMarkets report, the global CRM software market is projected to grow at a CAGR of 15% during 2020-2025. With its SaaS-based CRM and social enterprise applications, we believe Salesforce is well positioned to lead the market.

Acquisitions: Key Growth Strategy

Acquisitions have been one of key growth strategies, strengthening the company’s position in the CRM solution-providing space. Notably, the buyouts of Tableau, ClickSoftware, Mulesoft, Datorama and CloudCraze over the last couple of years have been significantly beneficial for the company.

The acquisition of Tableau is in sync with the company’s strategy to diversify beyond its customer relationship management and provide more data insights to the clients. The buyout contributed $652 million to Salesforce’s fiscal 2020 revenues and $273 million to first-quarter fiscal 2021 revenues.

Additionally, this June, the company announced completing the acquisition of tech start-up Vlocity, which builds cloud and mobile software on Salesforce platform. The acquisition is anticipated to help Salesforce enhance its capabilities, and expand the customer base across the communications, media, healthcare, energy, insurance and financial services, and entertainment industries.

We believe salesforce’s sustained focus on expanding its business through strategic acquisitions and investments will fuel growth over the long run.

Partnerships Helping Expand International Operations

Salesforce's partnership agreements with the likes of Amazon AMZN and Alphabet GOOGL for the firms’ cloud services have been helping it expand its international operations. The company has also entered into an alliance with Apple AAPL, through which it is offering new apps for iPhones and iPads.

Salesforce has also expanded its global strategic alliance with Amazon Web Services to focus on new product integrations that will simplify secure data sharing, and synchronizing across AWS and salesforce services.

These Stocks Are Poised to Soar Past the Pandemic

The COVID-19 outbreak has shifted consumer behavior dramatically, and a handful of high-tech companies have stepped up to keep America running. Right now, investors in these companies have a shot at serious profits. For example, Zoom jumped 108.5% in less than 4 months while most other stocks were sinking.

Our research shows that 5 cutting-edge stocks could skyrocket from the exponential increase in demand for “stay at home” technologies. This could be one of the biggest buying opportunities of this decade, especially for those who get in early.

See the 5 high-tech stocks now>>

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